Yelp (YELP) Is Today's Perilous Reversal Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Yelp ( YELP) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Yelp as such a stock due to the following factors:

YELP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $354.3 million.

Yelp Inc. operates as an online local guide that connects people primarily with boutiques, mechanics, restaurants, and dentists. Currently there are 19 analysts that rate Yelp a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Yelp has been 4.5 million shares per day over the past 30 days. Yelp has a market cap of $3.8 billion and is part of the technology sector and internet industry. Shares are down 16.4% year-to-date as of the close of trading on Friday.

TheStreet Quant Ratings rates Yelp as a sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.

Highlights from the ratings report include:

Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity significantly trails that of both the industry average and the S&P 500.

The gross profit margin for YELP INC is currently very high, coming in at 93.03%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.92% is in-line with the industry average.

Net operating cash flow has significantly increased by 472.37% to $9.32 million when compared to the same quarter last year. In addition, YELP INC has also vastly surpassed the industry average cash flow growth rate of 22.21%.

YELP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 16.45, which clearly demonstrates the ability to cover short-term cash needs.

This stock has increased by 151.10% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in YELP do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.